LOVE - Earnings call transcript Q2 2023

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Operator

Greetings. And welcome to the Lovesac Second Quarter Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions].

As a reminder, this conference is being recorded. to with conference ICR. like host, to now Schacter Rachel would turn over the your I Thank you.

begin. may You

Rachel Schacter

Thank you. President Good is morning, Chief everyone. With me Chief Officer; Donna Officer; Financial Operating Officer. Shawn on Executive Mary Chief Fox, and and Dellomo, Nelson, the call

information started, events the our and statements financial These will we our some such get remind about that statements Actual results from prospects. statements. materially forth include expectations, and and would future plans I Before include financial our to forward-looking like you differ of discussed future projections set future regarding performance. may those in

For company's these filings risks today's of a SEC, the uncertainties, which includes discussion you the with press should review release. and

of this All make update required of obligation You law. that we them, are statements call today, future no as events. and on should and as not rely beliefs on forward-looking to except on our based assumptions forward-looking undertake as applicable we predictions by statements

will to Our a substitute information including be from, release. to, measure in GAAP the as not include most non-GAAP reconciliation EBITDA and financial A been considered or supplemental financial measures in directly discussion in should as results. These EBITDA. non-GAAP financial our for, isolation measures today such of adjusted non-GAAP addition and measures, GAAP has comparable financial provided press our

to Chief Executive Nelson, Lovesac call Officer Shawn Now over I'd the to like The Company. turn of

Shawn Nelson

related finally, our room will positioning is initiatives Chief our Q&A in our session. progress on to in second for Strategy fiscal within And strong you Krause, to Mary this will you strategic the items Officer, everyone. outlook Good a joining and today. then quarter. against review our you, Thank the few by more and our morning, in President participate Jack Donna Then and industry. discuss XXXX will quarter other thank reviewing the COO, Fox, made Today, detail. Dellomo, And financial results also CFO, us Rachel. we the update highlights the of performance Lovesac's we start

with We last the time against home we one are top remind our quarterly anticipated. still rate of After line the also very pursuant than results out some when the at on QX with category ever our a outset as order against are our most you quarter said not expectations carry achieved goods strong year's up ever. as of we our spending perhaps a highest public typically much backdrop. dynamic we exceeded recognizing deliver do performance was because consumer macro quarter, the second and company. backlog results pullback and that in days and a attenuation real results less ship in the This last of growth bottom pleased call, recent was and that after I'll just and dramatic

our let me broad-based performance. period prior-year versus quarter up Adjusted the existing total manage gross $XX.X were we pressure expected comparable delivered growth chain margin with and structure despite as Now, EBITDA grew expense million review $XX.X discipline. the sales million the customers. from highlights strength prior-year Total new to both second with We million, supply in of XX% driven from sales period. of XX% $XXX.X our

that ROI awareness gains high to continue a resulting seeing. brand We key and is in advertising, we're contributor the invest success of marketing and which sales

digits. into couch total many, industry market the down category share challenging large base Importantly, small that our backdrop is of against $XX.X plus very The for off fragmented illustrating gains addressable proved in and an billion. audio home results we home deliver these a market year-on-year double a

platforms, strength. of now, at strength points, quarter, which our and are compelling on is growth fueled live brand This the inflection growth quarter should very rate speak proposition primarily and currently product building are customer by itself. adoption that after rates high reaching four-and-a-half value important Our years design awareness for for

seasonal to with profitability of believe model all So for and growth result showroom we most will rapid We are of proved to our merchandise a in-stock so made all of like throughout peers. We most We quarters? why of our not don't of this position, operational cycles not tumultuous operate a has assortment We and the the and recent and high adoption, most broad years, economics, Lovesac big peers. consumer. on resilient invent Sustainability, product inefficiencies do for designed be business grow. margins We action. and apparent do as or along solutions our in create that number be like for best-in-class model the even categories new had. direct business life to continue with to the patent past the be continue in with come that items executional ticket

best expand are portion well adoption and to continue market with market marketing, that far phase finally of can outsized that with on we highly to phase for fragmented achieving superior a way are on through currently this a scale for advantages, of example we early paired market adopter are of way couch an grow that between their the take and curve. and share, we myriad Designed product believe to Life so X% will a like our We product. solutions with possible only on category, still. X% early products, Having the that believe Sactional, with classic superior the share comes long ultimately with achieved in is We to we superior share deft these. majority

marketing to the believe because driving of For a competitive purchases now mouth our Sactional's yet versus of their ongoing highly is who sell generic of and solution. This ROIs qualities. unique competitors but bolsters this we well third nearly reason, come. designed, is other best Word essentially

continue system, This investments We more more is with scores our our mind sell. resilient. consumer. services process, we the so have demonstrated to the customer why a believe part sell, in has satisfaction in as the we been in Lovesac to can infrastructure, improving the further growth and brand of that strength will due is gain And our we we even scale continued

before COVID, Our even during versus now this down continues growth this strong challenging are we broader which extremely year, very in macro was overall after COVID. home environment up. is even And the furnishings to COVID, be as high category, way

these. Finally, resilient their we earners years have a the the consumer in investment typically are built mind, at during want-it-all, to targeting years, right young are advertising the times XX XX marketing our peak and our brand high and household we with pricing, are parent establishment furniture like of These group old. with

the the no when is household investments of are accident. the research, And there our remodel, home unique marketing discretionary broader the furniture within need attributes highlight couch that through priorities. the their worn-out as Our is considerable in on relocate replace couch truly is many top narrow the our But sofas, a furniture we subcategory win focus our in platform category to know to spends. There of and on of list objects as or the business. are

line Our in strengthens marketing the spend moat, fast have. nearly get. top we as our bigger absolute as sales dollars further This growing our

in execution touchpoints, mobile drives concierge and are Our XXX X the showrooms, omnichannel trucks broader purchases. is by sales and continue three like kiosks seamless thrive. category. That remodeling believe relocation unique dynamic and why, Lovesac the even these, is for Lovesac of now replacement, drivers we XX home top versus to Sactional, Which – – times only drivers lastly conversion. Lovesac to Those three followed new can we XXX

initiative. continue and to awareness share to against recent showrooms Our productivity healthy build channel gains, position expanding each market brand the on our innovation, performance fuel we investments, and reception type the digital focus growth. progress StealthTech, make our in any to these marketing designed the to in doing see growth of growth and effectiveness impact our line our we more our I continue the our strategies We're gives From initiatives, fortify The proud with all strong gains. thrilled disciplined of execution, to gains of of of are our am to our runway and key me to share of the with across macroenvironment. ability work continue on we're drive share our our and market top combined have the confidence areas

our supply spending foundation of in order and infrastructure is have support long to growth prioritized chain is have discipline position make our our Even and ROI satisfaction have scores. facing, demonstrated improving expense talent in-stock teams the we supply solidify the as chain and industry industry-leading well marketing that as runway as the that investments and challenges systems, ahead. the and enabled continue to It navigate lies customer to made investments technology high strong we key in

momentarily. discuss growth So, Donna areas, market in share planned as Mary investments gains, support accelerating of these and will actual our we're in and

adjusted approximately toward could decision and basis of of satisfaction, and operational margin set we in important for these this our right XXX efficiency While points the year, expansion ongoing. easily margin customer to chain will us up business, supply deliver redeploying the technology win EBITDA which turn areas is EBITDA

we not unique consumers business Lovesac foundational resonate of highsainable continues seeing how with fruits and times. sustained a [ph] products, sustained are outcome we the that competitive to to sustain, means [ph] Finally, commitment us sustainability lead at but operate time that is only and our to model changing to Sustainability you every in that things actually these highsainable report.

always this our on to great high balancing products with our circle long-term long-term returns. mode, our services, reasons. growth We Even for and in consumer our resulting we managing and goals long-term operate with philosophy, discipline, Designed will according to always brand business in investments will a with customers our relationships Life expenses focused marry focus ultimately policies and myriad and profitability for growth love and who with programs, have

the by world's our zero the zero way. waste We're beloved includes mandate and of XXXX. brand, mission to stated targets Our emission home achieving build rapidly while most on

the their entire want for enabled team call them Lovesac and operational We thank and performance. I have our #LovesacFamily. Lastly, to that the financial execution commitment

we strategic what cover it priorities and deliver progress. to you do deliver Mary able do. our are to With We you I'll to hand what over Mary? that, because

Mary Fox

you, Thank Sean. good everyone. And morning,

record for company. our two results quarter the Our mark quarter second

results, with an was of period. greater a past performance. significant stack quarters profitability in in it over focus XXX%, XX% growth our of And this the given than represents EBITDA these strong XXX% shared, on fiscal time. of growth CAGR a XX.X% and XX market demonstrating over years, gains have comp XXXX the we baseline, margin now same adjusted is four Sean growth. of consecutive share an course dollar As our achieved as outstanding three-year time Using This

the are demand to which key our this operate less I customers, even significant turn priorities, that strongest show for the performing estimates are were Shawn execution we This opportunity, due strength and the as with, what in year, values seating large unique on seeing which shared. offers, will category. one, our of with experiencing, and macro presents to in also our two, core to relevancy, fragmented mouth of is that encouraged provide brand continue highly disciplined category a we demographic. built-to-last share if is are now. our significant Starting The contrast competitive the word the and strong as is in again We sharp quarter the few product by continued products market we In conditions the which to favorable gaining strategic updates share win markets innovation.

We continue was an the changer and innovation StealthTech, standpoint. for with game progress us from the which category of to pleased be a

efficient the sequential relevance continue environment. we strategies. in product ability to maintain merchandising quarter seeing be of Sactionals In adoption two, sold pleased sequential and that and those versus some significantly are as the to an a a highlights. reassurance commitment multi-year marketing with product of and XXXX what us did times is to AOV Number the we initial on is two, appeal. to The success saw our launch inflationary the fiscal in that continue that meaningful launch had This that quarter margin attachment key support StealthTech nearly Here were three as with one of progress increased are and not. continues provides build basis. light We grow rates

we to category relationships track, made lower strengthening, referral from the word is driver base. brand brand our Buy mouth of trends. to customers Costco of continue our KPIs our on metrics our part expand very mix, the of bodes again well versus the is both who Best awareness health of health and strengthening awareness our customers, driving goals the consideration one our category based to of higher strong purchase media media. driven number a This for of on to we conversion targeted we by with which and and purchase for leveraging as it focus funnel Further, Additionally, see through continue the share

to and media to three, local continue costs with testing, and as have brings lean trending on spending in and omnichannel line whole then hyper as end new media me market into Which including touchpoints performance a us and such which media. programs e-commerce. operations see TikTok projections We allows our stabilized our including number additional to targeted

We year, results XX.X% trend which social media bucking full programs the strong up continue mix, also marketing. to attribute funnel sales category. into see the as search versus these the the of throughout our to in new strength our adding brands of and digital advertising expansion last ecommerce as well We is

the balance year, remains of of optimization into the holiday the season. the ecommerce, For customer journey main heading point focal a for

the continue drives shopper we and two, For into that to their expand digital in advertising touchpoints. into lean closest marketing quarter

local into Gladly, programs loyalty. platform, advertising. quarter three, service satisfaction like expanding based to allowing in touchpoints geomarketing our YouTube customer the all and us and service Locals new omnichannel customers journey media and and we're launching across are customer of new increasing social better of And We customer amplification a our

critical touchpoints, look number funnel these showroom kiosk. marketing purchase The our play touchpoints locations. lower targeted portion in location-based opened delivered new strategy, productive the traffic and is to we these strong XX quarter driving digital our two, to supported at touchpoints highly expansion of In by our of omnichannel our one driving into of and we in results continue two. the role As quarter showrooms of strengthening a

opportunities estate see performance locations real in plan lifestyle to primarily made part pursue off-mall our and off-mall, continue evolving two, showrooms are up opened the those locations. and eight to We strong as of Of actively of lifestyle strategy. center XX quarter

performance. delivering foot these We touchpoints and square are than which sales expectations per very the targeted are performance happy performing with above new of higher our

cloud-based to class global omnichannel launched investment This in the provider relationship and investment with As our the This the of the peak quarter way productivity, greater aims focus. delivering a for up lays POS strategic in the And groundwork location especially balance XX new chain aligns the four, is XXXX. making technology a for disciplined POS transaction in and on POS focus sets showroom world in we quarter paving closely vendor two, best-in-class omnichannel for continue through then, our times. to new rollout accelerated model a efficiencies experience, pilots we This PredictSpring. investments. increase POS with fiscal operating four, infrastructure platform and

we're to customers. see, and our selling it growing As happier you we're continue customer base, creating more while doing

we achieved class. world satisfaction driven inventory which disciplined basis also stock inventory returned making advantaged we levels business and are points satisfaction with infrastructure versus commitment experience, with versus evergreen two We from been our only satisfaction as customer of Building last year and by fulfillment our over our customer of product a customer orders X% significantly is has score improvement was continue our that The our to We've XXX The for particular priority customers in a better increase and to performance us us which This ever. targeting. is in to investments growth. have living this was fulfillment years. increase is a been our aging, digital that fulfillment to our led drive invest year-over-year. and model has fuel in the our to customer been been key and focus experience of than in delivering for in year. improvements to frictionless And our been quarter our of our as for infrastructure. aware, seen research has inspiring And you have and inventory competitors, increase by weeks capabilities

investments some redundancy the sets port Our impact chain and from to year business inbound strong, and of This goods well around supply in on had in a and to a that delivery deliver time. up creating remain pre back allowed on lead and yet very a pleased to to reduce transportation pandemic a delays diversifying appropriate continuing have manufacturing tariffs strong return the us time despite volatility. position. to half see We're while US trucking us best-in-class inventory ocean China maintaining for our have

As yet see XXXX is container the associated down all benefits in historic although we rates. we see, pricing the levels, from not coming And XXXX. will for fiscal

As Shawn said, fiscal year areas. key the and achieve are to strong accelerating XXXX, growth this beyond three growth into in we investments

DC on work end to in the us This customer the team capacity our this DC our our will future support increasing be capacity by realize distribution distribution times to to first our four expenses four. lead at enable will already operational one to DC growth. expected And and of three. started increase satisfaction. The and facility is adding This has is quarter network and quarter to XX% our to begin associated improve approximately by

chain IT accelerating is And in expertise overall efficiencies and continue to system, required growing continue the investments trajectory to technology, deliver POS business. new the us I drive with order and mentioned ensure and scale external earlier. system growth a satisfaction the are we supply thirdly, management this. capabilities to to investing of manage operational be transportation second customer investments, talent, The management that will technology critical our for including including These including we our

in pleased two. performance we're financial summary, So, our very and with quarter operational during

marketing continue advertising brand to ROI been invest awareness which will and key growth our overall in to a results. We has high and contributor

scale and to that continue out to continue drive to excellence. growth build we capabilities will can operational our We our ensure with future

Life value compelling proposition our being proud model to that by category outperformance our the and are We the results for Designed offers. a driven business of is which

the to dynamic the navigate drive year, continue to back we Lovesac will team the as return. operational the to share over our quarter exceptional execution of related two operating Donna? the drive and pass XXXX we will controls to outlook. fiscal our now the call As market to excellence and results financial And Donna financial details of we committed growth a environment. we stronger remain entire look initiatives, review few half to our and gains I to

Donna Dellomo

of Thank for a of campaigns million due remarks results will increased our in quarter of everyone. quarter increase was review remainder second in fiscal million sales increase new and the the sales across a of principally million prior-year And sales driven This my of of Net I strong XXXX, $XXX.X provide comparable fiscal discounting, of a in morning, and in approaching second higher with increased period. framework XXXX. addition you, to related good and begin $XX.X XX increase and XXXX. how This is to XX.X% fiscal we're then million part XXXX. mobile second to concierge $XX.X million $XX.X X compared the or net fiscal of $XX the large is the $XX.X increase to channels. slightly Showroom in all transactions by which million year-over-year sales second prior-year the million quarter kiosks promotional point to compared XX% as was period. XX.X% or $XX.X higher the net growth sales The quarter promotional or Mary. and XX showrooms, to

the to $XX.X our million the transactions, customers by XXXX sales, driven net to in in shop-in-shop of through million of represent fiscal that million orders period, Internet as prior-year with increase sales forward planned to million not driven quarter increased period. and a is XXXX campaigns. when The which shop, transactions XX.X% or in $XX.X pull our made second As sale always of prior-year includes Other a inventory reminder, our point quarter control transactions net fiscal the to of and $XX.X with are sales inventory returned in million barter as transfers inventory at second recorded. placed the the million the compared ecommerce partner. compared XX.X% which principally principally Icon, strong showrooms, promotional to sales, or primarily channel, $XX.X customer to which does point reflect the directly of increase through $X.X openbox $XX.X increased barter performance the by our pop-up

Icon inventory advertising CTC, are credits, sales we DFL our reminder, transactions ESG which being repurpose our of awareness to a used brand As inventory support exchange in where initiatives for our net initiatives, with media and to and returned part create growth. drive are openbox

XX shops prior-year in Additionally, increases the partially bringing These locations, we XX lower Buy costco.com programming By XX.X%. of pop-up locations. a on to the to net category, extended product compared increased sales our count shift Sactional total offset our Best temporary our shop-in-shops by were period. productivity coupled by with online

success decorative year over the XX.X% activity, XX.X% the call, guidance six which Father's Our blankets Day our in sales increased pillows, shared to month increased warehouse driven throughput promotional quarter but sales our over other shifts prior-year exceeded even other category increased addition sales, XX.X% second you accessories, the our X prior the to promotional demand. net with second net primarily decreased period. on last and sac net of period. the includes in we sac July Due increased We the campaigns by quarter, and with has in

We XXX basis freight gross in by by inventory decrease total to in basis to our and rate by XXX period for lower projected negotiations promotional the in return points includes and related and assist costs. costs, one-time rebate impacts, the improvement mitigation to partially driven warehousing product the costs also approximately transactions currency margin, vendor increase in inventory These over points an normal which tariff of primarily season. with outbound XXX expenses freight, prior tariffs. principally an of offset full-year vendor to inbound prior-year margin discounting a were of accelerated The us additional was holiday majority the levels of points provide of basis growth space a driven box

sales expense Our as the because compared until to to due from to $XX.X sales to hand support was quarter This XX.X% of to of projected. in prior new basis sold growth. expenses as by to over increase but inventory is income the had shifting first year the see rates rent, net received than deleverage increase to rates million touchpoint costs costs. decrease of than both increased SG&A a rent second satisfaction in factors higher half XXXX marketing expense expenses campaigns sales $XX through expenses fiscal the which costs an remodeled and year-over-year principally partially second Advertising and inbound costs selling associate million, second million customer compared related the do million amortization XXXX. drop touchpoints net the of of million not in continue expenses XXXX fiscal was in the freight projected brand, points prior-year Overhead containers inbound period employment our projected on late a of making and as and the result guidance, percent of in net third the offset net are full is as to less is slight QX quarter, principally exceeded and anticipate continuous expenses million freight higher benefit as compensation, to period. expenses, to an support and maintain current driven have our rent investments were leverage due net the to The we quarter of these ongoing sales to quarter card related to capital to due support $X.X investments and or fiscal the equity-based compared of Depreciation the $X we percentage of and infrastructure to the beginning of and remainder quarter amount XX.X% certain overhead Advertising the growth. of increase in to increased of related SG&A XXXX, of We investments, travel driven in and insurance net to addition the sales by just infrastructure the employment result decreased related percent to as $X.X into benefit compensation, increase growth. the sales we prior-year in will the the in the the inventory support business The the largely by freight we year, these expenses, last $X.X prior-year to basis expense media quarter, XXX related XX within awareness period we primarily marketing the in of Net XX.X% investments rates gross new fiscal XX.X% selling-related of quarter in of continued compared the volume by inbound to was investments slight spend fees prior-year a million discussed. relate increase the marketing during a in margin second and credit Operating sales hires in to to to year points spends increase. expense and increase. due variable increased an lower our second for to $X,XXX second the for a showrooms. driven $XX,XXX. interest income $X.X by of due

Net was adjusted please period. our per the reconciliation to refer $X.XX income, Before GAAP fiscal or earnings adjusted and of terminology in we the release per to and million income in the prior-year per and each net of issued early our $X.XX most measurements million net EBITDA, to quarter share diluted XXXX $X.X second between share diluted income of compared today. in our metrics comparable directly $X.X attention or share turn income diluted net the

of of XXXX deferred net allowances in to assets. fully effective increase XX% recorded the having the in in fiscal company's increase system, $XXX,XXX valuation X.X% net by SG&A allowance of the rate Adjusted quarter XXXX, of and XXXX. EBITDA The $XX.X quarter compared taxes XXXX. and tax of This an of of period. including technology, million increase quarter the the of to taxes increase During exceeded adjusted the to the gross from from as to fiscal as million generated We benefit $X.X growth the fiscal chain continued compared of related well resources the half POS to the a the a is the marketing, was new income is the income which is fiscal in of XXXX. in second business. XXXX expectations, provision percent, by release the the primarily quarter in driven support for fiscal to fiscal sales, XXXX end investments higher for valuation surrounding as million in driven advertising supply prior-year spend second second $XX.X quarter offset fiscal due as of partially EBITDA company year The margin the year, of on fiscal decision second rate in the reprioritize by released to second the the conscious increase second the and of as

to balance feel of year-over-year our Inventory we about the the and XX% inventory. our both good and very sheet. quality Turning increased quantity

of Our comprised not to evergreen is merchandise. Therefore, run and in-stock of or levels. inventory is a we inventory competitive reduce overstocked risk being seasonal do the advantage not promotional having to be

freight impact to nearly our sheet increased and goal to freight. of with are levels ending situation. the and of support our inventory cost chain continued increase projections year-over-year maintain industry-leading the related the inventory supply in-stock in global half growth increase with our in balance inbound Our costs annual reflect line The positions, in

the moderate on a of in details and refer million Please of will rate second equivalents ended on borrowings. in release with credit no quarter the cash year-end. our balance press to and total that second our line expect the cash revolving increase XXXX $XX.X availability fiscal other of earnings our million quarter financial We year-over-year $XX with for We inventory performance. by

fiscal operate with potential as relates to wider continue it XXXX. dynamic of in to we environment outlook, a range our Regarding outcomes a

formal guidance, providing framework for not XXXX. but approaching are a how we'll fiscal we we you are this, provide Given

is first advantage first all in-stock for is low is earnings approximately fiscal be framework with growth in with sales scenario XX call. fiscal the ahead. shared net open year expected and growth reported the approximately furniture related headwinds net to the for and In competitive inventory us in to XX%, net a quarter confidence third the increased moderation sales the from fourth we experiencing, throughput that we in margin of inventory of gross our and and transactions the just continued category than shared we lies on provides substantial respectively. the the levels QX product in we you quarter sales representing returned reiterate reiterate our position the discussed growth For XXXX, earlier. as XX% rate and Even quarter which what on in QX earnings discussed was and call, opportunity growth box range, year investments to our sales, would net where showroom XX% support acceleration The previously quarter multi-year more that openings million infrastructure principally sales $X.X planned

freight fuel decline and half costs to over over While surcharges compared XXX in points XXX as total outbound the expected higher approximately in approximately XXXX prior basis the in we of to and be margin to incurred be continue below last In costs the inbound mile we QX gross primarily basis first to approximately quarters. in QX prior The freight fiscal is are basis year of XX XXXX. QX, increase to an expect points year. fiscal rate higher points estimating prior-year the XXX related points, basis

reminder, to Product estimated the also is is inbound on than of a to are capitalized period. of of P&L margin sold. XXX the points in weeks higher projected promotional the based prior-year related As inventory. This amortized aligns the cost inbound approximately discounts to by decline supply to when basis inventory and freight costs inventory freight

spend certain and accelerated and strategic chain, reprioritized As to technology John supply Mary roadmap. our support have resources we around growth and mentioned, infrastructure

increase and related over sales sales points with QX the seasonally year rate. reprioritization, the in quarters. of to XXXX slightly prior-year The margin rate EBITDA investments fiscal by XXX approximately gross basis for leverage due to approximately adjusted which a is XXXX. basis while QX projected higher higher approximately adjusted XXX year, QX the The QX to to increase adjusted is and is prior in projected is expenses infrastructure operating to points over quarter dollars we As for basis prior over to and of volumes is points impact fiscal third grow decrease expected this decrease EBITDA margin expect the discussed, projected incremental growth result margin principally decrease rate. EBITDA X,XXX

from our business to team with are expectations the operate challenging operating we pleased continued quarter results and discipline. exceeded fiscal second conclusion, that sales in macroenvironment, Despite execute a So, against growth our the perspective. XXXX our strategies net our profit and with

for half we questions. and the it we call to growth see now like up share in confident opportunities second back With will continue positioning Operator? to the gains. operator and would are market the that, turn We our we of the open can who year, to on for attractive capitalize for the

Operator

Instructions]. [Operator

Forte Our first Davidson. D.A. of from comes line question Thomas with the

Thomas Forte

Donna, on First again. off, an once Jack, Sean, quarter amazing congrats Mary,

Designed such you at is, differentiator? question mean few why does Lovesac first a is my for Life remarks, it prepared in So competitive a mentioned Shawn, what your and times

Shawn Nelson

to services, those Designed products, develop is of design we products. And customers. conceive products long-term programs, married circle Life how is our develop to strategy. of how is consumer relationships long-term It's our we conceive a and focus services nutshell to to long-term for in with policies

ones. strategy, So become it buy totally of compel in entire new business any see meant much in is it to and our and marketplace as unique to the products so temporized by us it to has put driven because bluntly, consumerism disintegrate category we

same do so, while results years because et kind accessories, them into that you've the we're dominant And that takes razor/razorblade for in other excited and accoutrements, with adjacent unfold to that also do we aspects this new repeat this drives cover, up Sactionals – just to philosophies utilize put drives design cetera, achieve these rapidly the categories home. don't time. categories some throw of seeing Sactional them seen that when the level. that very have results you're kind exploit the to of are us of will have we that But And now try we We you cetera, ourselves we business, business solutions. throughout and to believe Sactional, results et loyalty, years

is And as is us, outcome, that sustainability. results it, the proud the ethos, it really we're we And everything. of to of so, see and represent course, we're true and which, to proud

Thomas Forte

a how much product your opinion, could does against For Sactionals Sactional, at hard my revenue sound you that least, compare my than generate seems how to it at margin StealthTech follow-up, from product, its system, gross maturity? you even believe better And in while [indiscernible]? it's the sell

Shawn Nelson

to live This accessory, on I Sactionals, with by pieces the things proud think are the just say blown It's I we own StealthTech characterize Right? Sactionals unique our millions Designed Right? do the home newest a thing. because the emblematic by hundreds which Right? should best to of for we of added at not forward. way have few the StealthTech, that from we way look, tell Sactional marketplace my aren't and to in which am have to I've And as I'm I nightly bought it. you StealthTech. of I little its in embedded broadly, line years, easiest in then our thing product the Life view, make myself. philosophy next sales add-on make in so system a and little We action. of to just not today. some away it just will new of cute. broken way waited sales put experience the that StealthTech is is point theater the StealthTech is get out have that very And is XX-year-old

Life of is most recent so much a StealthTech the most and And invention, for product it embodiment is recent fun. so, our Designed

that's you way. understood, on website And the from and experienced following be on showrooms, we cannot by off Lovesac it's have the certainly you're It certainly is not our model. this pays it, really call, This whole that not experience that it. If why business critical product a haven't even its face.

person. in experience to have really You

warranty grateful little feel off the had running, it. and no to we've grateful meaningful of see it we and kind from expecting things issues of proud any to and that very So, launch

Operator

question next Nagel line comes & Our Oppenheimer with Brian from of Company.

Brian Nagel

bit. Shawn, add Actually you both in abating for questions. last nature. here a But guess, nice mentioned, I be couple quarter. some And softness want apologize, going the they're congrats opening I my I've a of to about quarter shorter think low a little term a in the commentary that made to first your end and comments, off, you I at maybe got

wondering can the business. my a piece, is regard quarter? what with halfway I seeing so the year, was and of we that if piece – almost second question, consistent balance the to you can is QX, the better more Donna, the add I framework little your guess, you you we're, the So you outlined outlined different of trajectory what for on of the the framework the QX especially through color that understand that Then business just now with with for there, you're

Shawn Nelson

QX results, may begin Day, quick it it quarter weeks just with transparent our kind see wasn't read that. become. and can that's you to about quarter. from soft, as Labor a may some a was we then shape timing Day for a QX, Labor feared the we from – we necessarily as a outlook of in, had as similarly, quarter have And of a begin were moments. few maybe for soft Often with the read and may we on instance, Like, begins get all

specific from Jack, I or may you within, of think, Mary, the but shape promos different have quarter, may any have essentially you happened. observations what that's – the other

Mary Fox

to Just a successful Shawn's really point, to we Day through add had to X. Father's July

see results, and you confidence the gave that resonating brand in what and we going us obviously obviously much in continued forward. the see that's the success So how is

given that we two, excitement strength, came you means that of so Shawn very some around the of Hopefully, quarter framework, the all three, good it's pleased feel year we there's obviously three. gift the particularly So, just in that the and the forth. week around and that always great moving which we're but StealthTech feel and much into of within going always I very were feel can into and with bit quarter a being two, much shifts confident talked so giving about. the of the agile. actually and there's we've Donna too month kind actually think a programming a anniversarying that a and very very balance and of danger detail about season quarter But quarter obviously, quarter about share because

we're great position, in the field, cetera. with inventory great et hiring So position

for for We to Brian. add I know don't the year. go Donna, there's you three good to want rest set of are if quarter anything on and feel the

Donna Dellomo

Shawn we important believe in never QX increased of of look But some for and boxed good provided too transactions that other with Mary try to pull but to we into as going into said, well, we to it take side And you that as QX at conservatism note accelerating just pretty on on QX had rate. we closer that just how you'd forward, believe, that into the QX. line of I consideration, rate, to know, things to well what is a couple consciously know, guidance it's $X.X throughput sight to think right – although million forward very bake line had would both if a in Mary we up. I because for we into think at may XX% good you Icon, we're open a end a able and – the said And XX% were pull our now much had as we performance. of QX have be QX between line you as our I what see sight, shape have with lower projecting the that a

Operator

Our of Alex Craig-Hallum line next from question Capital Group. with Fuhrman comes

Alex Fuhrman

the for of year about terms bit investments expect strong to of of have you would numbers putting what not what next timeframe little next is the kind really these half year. likely that just being are I next Congratulations know into about you a year. year, it's making. if the mostly we together of I for imagine cost what in quarter. new of impact some much little margin investments and that first talking these wondering projects the how the lower but a the that And just additional to distribution you're into to investments center sounds EBITDA in a these that's EBITDA and this obviously are to on margin it about year, something will is should some the talk next And ask go continue timing would going them? your I next wanted going primary of – be year, another of bit on for for Can seem like these initiatives investment to reason be? outlook

Mary Fox

We're on kind always to with obviously, investments, I of it our summer, accelerate during year needed plan. the focused, clear reviewing that obviously, based two and us growth the we forward view in our had laid we were very as then leaders, of out. horizons, strategic And the in became to rate our all that, our that continued

talents to As be you rightly our drive and DC, really of FY infrastructure said, will able terms but for example, in the help also in that us and capabilities additional beyond. XXXX through critical the to growth

growth us that we making us, up aligned moves upon. we're believe is for bold something continued that for sets that So,

also set we'll heavier that for but heavy When really of is order is it the the us a this lift work bear you it's this obviously, costs systems build, the of come factor thinking of you have to processes as some more to As the in in that putting places, obviously, in for year framework, in, a be of the done, frankly, heavy us XXXX there around and kind of DC, said, lift to up. be investment in through more on there. to year when we lift FY the

to taking So, support. because need we that on But teams we'll give infrastructural the the do we and for now, the share good year. them at feel move based really that us, are of end more excited

Alex Fuhrman

prior inventory follow-up Just inventory a think Is time. Can to needing center? very business center. is you're Obviously, growing your fast up at quickly? going very is be something distribution peak your sense you you give kind you're here new it and to to ability new the distribution on the the handle us a of what of same now, that taking this

Mary Fox

to jumped DC of actually faster this before, see as shared satisfaction deliver you a have with be customers we're I is fulfillment, the in Part [indiscernible] to customer year. new the the south happy bringing to so serve still this at up really year. able in We ability to And speed. the

it's well out as to proximity obviously that the before. as as geographic So laid I much capacity customers, around

don't see go we year. needed in DCs now easily. we build this as we capacity. see up So, start always come and to the that time next that certainly it's is frankly, year, us any to constraints for don't into for so But And

Great was for So us. it perfect model. for important, it also was the

able being in. also about was it lock to that So,

both So bit from that side, of Alex.

Operator

of comes ROTH Matt Capital. the from with line next Our question Koranda

Matt Koranda

in the the clarify to quarter-to-date trend you earlier that wanted guys had Just Q&A. discussed

how could in Just responded on Are environment tracking how with the guidance. a broader the QX the comment QX Labor consumer QX put in Day on into to promotional up if line wanted factoring point we quarter-to-date the it. you're the industry you and the curious to XX% outlook. I'm and finer maybe in sale just

Mary Fox

the Quarter-to-date, Donna including and about feel Labor framework Day, we really good feel performance. shared our strong around

are the We category, continue to grow of and share. taking well ahead market

So we baked with have but performance and said, the in we quarter whilst just gap we conservatism really there's a the actually, grow, dynamics our in two, macro as that we more. where as category. is the all and the growth, manage all feel whilst the saw Donna we to to stand strengthening full because, in more our And see And to we're that's good now. seeing category obviously frameworks always throughout, And we through best the there ebbs on read also as widening we're always time. throttle continue driving and performance flows we right

year of is from if XXX%, quarter just this that good. think geometric So we side. you And stack build up, two, feel just even to the three continuing

and So, nothing quarter of the rest three the other four into than year. and confidence quarter through

Matt Koranda

how checks efficiency seeing? on that StealthTech, traffic. of the a to Just indicate because just quantifiable is maybe bit curious, Shawn's big front, Sactional And some can adoption you on wanted threads And metrics of a that Sactionals. detail of more marketing more if you're attach around product with little into our on how this sort is marketing seem could word get to I'm we there. wanted efficiency driver to share see of to on mouth Any store see rates helping pretty

Shawn Nelson

We not attachment that StealthTech and to they're broken talked have according target. moving Broadly, They're plan. on I'll out about rates. just say

leap side Given products, – It's home less been on for than and lead not just the a to brand, market brand making that meaningful take marketing. as these couch a of it's not home anymore to on even electronics good home being huge performance with and it's company, impact company, a it's a the a news us. being our our as a going and of from huge in that years brand for that's come and seen electronics company The electronics off but to is running maturity. year

clearest I advertising the a massive TV commercial, is StealthTech think any shows our with example of Sactional. portion is spend, which

think behind, success over we've think already something $XX with material seeing roughly, are is This StealthTech-related on commercials. I spent million So, to date, we materially and it. we're

is ROIs is of This us? it. to of Why a years doubt marketing for cause that's In high product remarkable. Why product designs, There misunderstood are the quarter it, we talk is not StealthTech. but most remarkable. And – a so about out In there Because Why where now? people about are word are after strong to are winning? that that's about beautiful remark. word terms for products beautiful I of And mouth, the and they're our quarter don't landscape what's They so remarkable. there. good brands of quite most think aspect Lovesac. probably underappreciated no is mouth

other that and of a business our as will categories believe being absolutely Sactionals we is, And runway of just competing at as hope, we buoying StealthTech when, by in a StealthTech a adopted word And We course, We in. cake coming long, and not the were mouth we icing This come brand broad sub is becoming eventually way, into rate. so, audio our just line way. marketing for we're the of it maturity. to of ROIs, on think up a has a leverage again, for the part expand and is long big at brand own Sactionals. improving the category their finally mainstream, the to time it us. home

thus into it's So, sorry, and category carefully thoughtfully, step give but data that our not more public the a very granularization of far. that is we approach and given new color, our

Jack Krause

there's of of a doing, lot us which our is to in drive is lot we is advertising targeting. seeing mouth. John, kind our – own these what seeing. with of outside classic is The a conversion and the and convert. that of thing the think making of driving funnel, hyperlocal the our higher marketing and our also ability the that, to top get think mouth really of what And to the add word middle holidays. Mary power word you to it's funnel own creating easier thing as and closer also of funnel funnel, helping to And amazing of of discussed see I enabling get bottom the rates, call would we're and I if top the team that of One That's you to we're think traffic about the what

we a brand, more about lot have signs, and over the seeing our we're we mouth of future. control of it. word And driven of a we're So destination feel great

Operator

with comes next of Canaccord the from Our Maria Ripps question line Genuity.

Maria Ripps

thinking up of about the investments the balancing referrals about that on gaining you, for can you and with you environment talk following of of consumer demand marketing versus strong the Just just in softening of share? how maybe sort sort backdrop you're demand driving broadly incremental last question

Mary Fox

our Every great not it, so they Shawn's our back love we been of products. love that just talk what around, mouth, just talk you talking one forth, Obviously, like products. about, they functional, with success, about really strong people word is to as and referrals, our it's it's just

we're around is really local, everything So, programs, it said, much in or, to the be just kind marketing, as we at targeted I Jack top funnel doing to from hyper bottom. as more think of the whether all look it continue of TV strengthen the investing

you showroom higher and more in all us brand than seeing stickiness. rank especially and to latest look key around more in creates double at of just a in about brings as beyond from thinking coming area are for purchase starting whole the it. furniture. moment talk and health as we just ROIs And a coming strong it's local that well, we that showrooms update, it's of frankly, excitement. As It dynamic people the through we're people ever, those really brand for know created family conversions terms down of and and get us a trying and in And to us an a the just kind in put StealthTech it just about just has amazing lot their consideration

agile, continue adjusting. will be we to So, very

I the media adjusting They're about think talked do marketing I around ROIs. And in time of and social approach a they're to we great always in disciplined learning real job. every terms a bit team seeing so a we and The forth. dollar test have where very spend.

that increase. So brand more as on stickiness continues to continue to build to

Maria Ripps

shop-in-shop customer traction touchpoints? locations your if more Best in secondly, conversion and you Buy maybe you're can other seeing StealthTech or talk on with about StealthTech,

Mary Fox

the shop-in-shop StealthTech. double I attachments Best the seeing Buy think our to we're for part excitement and of, and accelerate. Best is of that build continues rate our in obviously, And Buy partnership of strength

of a that's go into, look us, where for home So lot consumers for audio.

So we I And home there we are able with we and to. one the product be front access very as a in expand for Best Buy to every strong as for quarter, audio you year partnership role our and America with play family the next see the and to have what shared continue with center. in last in number market, to beyond, will

Operator

any for to for that allowed Nelson questions. floor comments. turn and time Ladies gentlemen, you. our Thank the Mr. concludes back I'll final

Shawn Nelson

support family investors and company, Thank forward you all partners to associates, to appreciate to and our all of who of you and it. continue we with Look the the Lovesac next speaking time.

Operator

Thank you. concludes conference. today's This

You time. participation. for your may Thank you at disconnect your lines this

The Lovesac Company (LOVE) 8 Sep 222023 Q2 Earnings call transcript